Economic risk analysis of different livestock management systems
J. F. Scott A D , O. J. Cacho B and J. M. Scott CA NSW Trade and Investment, 4 Marsden Park Road, Tamworth, NSW 2340, Australia.
B University of New England, School of Economics, Armidale, NSW 2351, Australia.
C University of New England, School of Environmental and Rural Science, Armidale, NSW 2351, Australia.
D Corresponding author. Email: fiona.scott@industry.nsw.gov.au
Animal Production Science 53(8) 788-795 https://doi.org/10.1071/AN11249
Submitted: 20 October 2011 Accepted: 20 March 2012 Published: 10 July 2013
Journal Compilation © CSIRO Publishing 2013 Open Access CC BY-NC-ND
Abstract
The Cicerone farmlet experiment, conducted on the Northern Tablelands of New South Wales, Australia, explored aspects of profitability and sustainability under three different whole-farmlet management regimes. The 5-year period over which the treatments were measured occurred over a period of generally below-average rainfall, hence responses to management treatments were limited. A modelling approach was used to estimate profitability over a longer period representing the variable climate of the region. A stochastic discounted cash flow model was developed to estimate economic returns of two of the Cicerone management system treatments scaled up from the farmlet scale (53 ha) to the size of a typical commercial farm in the region (920 ha) over a 20-year period. Several scenarios were used to estimate the commercial-scale returns under different rates of pasture improvement and stocking rates. Over the long-term, Farm A was found to be more profitable but also more risky (in terms of variation around the mean of cumulative discounted cash flow) than the ‘typical’ Farm B management system. If livestock managers choose to adopt a pasture improvement strategy based on renovating pastures and increasing soil fertility, they are more likely to achieve higher net worth with more moderate rates of pasture improvement than those explored on Farm A where a high rate of pasture improvement had been implemented in order to quickly differentiate treatments.
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